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Income Planning Methods

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You’ve finally got your paycheck and it feels good! After you’ve paid your taxes and other bills, you might be wondering about how to efficiently allocate these funds in a way that sets you up for future success. Great question! We can help with that. At 3 Rivers Financial, our team of finance professionals can guide you through the process of setting up a personalized budget. By taking a thoughtful and strategic approach to your finances, you can set yourself up for a bright future. So don’t let that hard-earned paycheck go to waste - budget wisely  

What Income Planning is The Best?

That answer to that depends entirely on YOU! Everyone has a unique financial situation and your budget should be adjusted accordingly. As a baseline, your budget should reasonably cover all of your needs, some of your wants, and factor in savings for emergencies, future investments, and retirement. Once you branch out from that starting point, there are lots of different income planning methods, such as the envelope system or the zero-based budget. A common one that you’ve probably heard of is the 50/30/20 rule, that allocates 50% of your income for needs, 30% of your income for wants, and at least 20% of your income to savings and paying off debt. Remember, these numbers don’t have to be a strictly fixed point! Together, we’ll assess your finances to customize an efficient budget that works for you and your goals.

Why is income planning so important?

Income planning is a great way to alleviate stress when it comes time to pay the bills, especially if you have a fluctuating income. Not only that but, according to the Bureau of Economic Analysis, the U.S. personal saving rate as of April 2022 is only 5.2%. That’s a lot of hard-earned money that’s landing somewhere else other than your bank account or investments and working for your benefit! By spending wisely and designating a specific amount towards your investments and savings, you’re placing yourself in a good position for financial security and a comfortable retirement. 

What details are considered during income planning?

We’ll take a look at details such as…

  • Amount and variability of income
  • Taxes for freelancers or contractors 
  • Deductions for 401(k), savings, health/life insurance
  • Investments and retirement accounts
  • Measuring progress and monitoring budget for efficiency
  • Methods for exercising accountability